Service export prior to Export of service rules, 2005 are eligible for export rebate

CA Urvashi Porwal

Brief of the Case

In the case of J.P. Morgan Services India Private Ltd. Vs. Commissioner of Central Excise(Service Tax), Mumbai, it was held that the benefit of export rebate cannot be denied even if the services are exported prior to the date when Export of Service Rules, 2005 are brought into the statute.

Facts of the Case

The relevant facts that arise for consideration are appellant had filed a refund claim on 12.01.2006 under rule 5 of the Export of Service Rules, 2005 (herein after preferred to as rules) being tax paid on input services utilized for export services during the period September, 2004 to June 2005. The adjudicating authority after issuing the show cause notice, and after following due process of law, rejected the refund claim on the ground that they did not submit the relevant documents and the procedures as envisaged in notification 12/2005 dated 19.04.2005 are not applicable for export made prior to that date. Aggrieved by such an order, an appeal was preferred to the first appellate authority. The first appellate authority also concurred with the views of the lower authorities and concluded that for the period prior to 19.04.2005, notification no. 12/2005 will not apply and the refund claim for that period is accordingly rejected while for the period post 19.04.2005, he has remanded the matter back to the adjudicating authority to reconsider the issue after scrutinizing the documents. Aggrieved by such an order the appeal is before the Tribunal.

Contentions of the Assessee

The assessee contended that the rejection of refund claim is incorrect and there is no dispute that they had exported the services and/or eligible to avail CENVAT credit on the input and input services. The assessee further contended that there is no dispute as to the fact that input services and inputs are used for the exported services. The assessee further contended that the judgment of the tribunal in the case of WNS Global Services P. Ltd. 2008 (10) STR 273 will be applicable, that it has been upheld by the Hon’ble High Court of Bombay as reported as 2011 (22) STR 609 (Bom), the assessee relied upon the said judgment for the ratio that benefit of export rebate should not be denied even if the same are exported prior to the rules those are brought into the statute.

Contentions of the Revenue

The revenue stated the provisions of Export of Service Rules, 2005, and submitted that the said rules were brought into statute effective from 15-03-2005. The revenue submitted that the refund claims for the rebate on tax paid on input services prior to 15.04.2005 are not governed by these Exports of Service Rules and need to be addressed independently and no refund claim has been filed by the appellant in time. The revenue further stated that the provisions of notification 12/2005 which brought into statute, the Rule 5 of the Export of Service Rules, 2005 cannot be applied retrospectively.

Held by Hon’ble CESTAT

The Hon’ble CESTAT stated that the issue involved in this case is regarding the refund of the service tax paid on input services for the period September, 2004 to April, 2005. It is undisputed that the appellant had exported the services and are eligible to avail the CENVAT credit of service tax paid on input services. The only bone of contention between the appellant and the department is regarding the applicability of the Rule 5 of the said rules for the refund of the amount of CENVAT credit on the Exported Services prior to 15.04.2005.

On consideration of submissions made by both sides, the Hon’ble CESTAT stated that both the lower authorities have misdirected the findings regarding the non applicability of the Rules in this case.

The provisions of Export of Service Rules 2005 was brought into statute under notification no. 9/2005-ST dated 03-02-2005 and rebate of the services tax paid under Rule 5 of the said Rules was brought into effect in statute from 19.04.2005. Appellant had filed a refund claim under the said Rule 5 of the Export of Service Rules 2005, on a contention period prior to 19.04.2005, they have exported the services hence eligible to claim to the service tax paid on the input services used for the export of services. Both the lower authorities have held that since notification no. 12/2005 dated 19.04.2005, permits rebate of the service tax paid in the respect of export of output services is effective from 19.04.2005, any export made after 19.04.2005 are only eligible for the refund in the said Rule 5.

The Hon’ble CESTAT stated that the view and the findings recorded by both the lower authorities are flawed for more than one reason.

(a) Firstly, the said Rule 5 though brought into statute in Export of Service Rules 2005 from 19.04.2005, cannot be said having applicable only for the exports made from 19.04.2005.

Further the said Rule talks about granting of rebate of service tax paid and does not speak about that said Rule will be effective from a particular date.

It can be seen that the said notification also does not indicate that an assessee has to export the services on or after 19.04.2005 to avail benefit of rebate of CENVAT credit. A plain reading of the notification indicates that taxable services has to be exported in terms of Rule 3 and payment of export of such taxable services has to be received in India in convertible foreign exchange and the duty/tax has been paid on input or input services. All these contentions are satisfied in this appeal filed by the appellant.

(b) Secondly, this bench in the case of WNS global services Pvt. Ltd. (supra) on similar set of facts in respect of refunds under rule 5, held as under.

“9. We are however in agreement with the last plea taken by the appellants that the refund claim filed by them on 26.4.2006 onwards will be governed by the rules as it stood on those dates. The substituted Rule 5, nowhere suggests or says, that it will apply for exports made after 14.3.2006. Hence any claim filed on or after 14.3.2006 which satisfies other requirements of the rules and notification issued there under, cannot be turned down on a ground which is not a condition or requirement of the rule or notification. A statute cannot be treated retrospective merely because it relates to the past action. A stature which takes away or impairs vested rights acquired under existing laws, or creates a new obligation or imposes a new duty, or attaches a new disability in respect of transaction already past alone is called a retrospective legislation. The position that a prospective benefit under a statutory provision is measured by or depends on antecedent facts does not make the provision retrospective. As pointed by the ld. Counsel for the appellant, this has also been stated in the Principle of Statutory Interpretation by G.P. Singh at Pages 462-468 of the 9th Edition that statutes conferring prospective benefit on antecedent facts does not necessarily make the provisions retrospective. Reference in this regard has been made to the Supreme Court decision in the case of Gouche Pierre Andre v. Superintendent, Central Jail, Tihar, New Delhi, AIR 1975 SC 164=(1975) 1 SCC 192 wherein Para 2 the Supreme Court held that benefit to set of preconviction detention period against the term of imprisonment conferred by Section 428 of the Criminal Procedure Code, 1974 where an accused person, has, on conviction been sentenced to imprisonment for a termis also available where the sentence was imposed before the commencement for the code to reduce the unserved portion of the sentence and that in so construing the section it was not given any retrospective effect for it did not affect the sentence already undergone but affected only that part of the sentence which remained to be served in future.”

The above reproduced ratio would squarely cover, the matter in the case in hand. The revenue was aggrieved by such a view expressed by the bench and preferred an appeal before Hon’ble High Court of Bombay, their Lordships, vide their judgment and order dated 10th February, 2011 (as reported at 2011(22) STR 609) disposed of the appeal by recording as under.

“9. The above finding of the CESTAT cannot be faulted because substituted Rule 5 of the Cenvat Credit Rules, 2004 does not make any distinction between exports made prior to 14.3.2006. In other words, as per the substituted Rule 5 refund of unutilized cenvat credit in respect of exports effected in the past is available to the manufacturer as well as provider of output service. Proviso to Rule 5 as it stood prior to the amendment on 14-3-2006 clearly provides that refund of unutilized credit is available to the therein. As noted earlier the appellant fulfills all other conditions. Thus, reading the Rule 5 as it stood prior to its amendment, as a whole, it is evident that refund of unutilized credit is allowable not only to manufacturers but also available to providers of output service.”

It can be seen from the above reproduced ratio that the higher judicial forums are holding that when it comes to substantial benefit the absence of specific embargo in the rules, the benefit should not be denied to an assessee.

Applying the same ratio in the case in hand, the impugned order is unsustainable. The impugned order is set aside and the appeal is allowed.